Reducing Labor Market Flexibility: A Causal Inference Study on Reform in the Netherlands

We investigate herein whether the Balanced Labour Market Act (WAB) of 2020, which was intended to reduce the disparity between permanent and temporary employees in the Netherlands, has achieved its desired aim. Using a synthetic control method, we find that the introduction of the WAB led to the termination of temporary contracts whereas the number of permanent workers increased substantially. As of the WAB's announcement in May 2019, strong anticipatory effects were evident. It is inconclusive whether the WAB had unintended side-effects such as the substitution of temporary workers by self-employment arrangements.